The Apex Court in a recent judgment have stated that payment of stamp duty under the Indian Stamp Act is not necessary for the enforcement of foreign arbitration awards in India, thereby laying at rest the issue on which various High Courts had taken contrary and conflicting views.
The main reasoning of the court was that a foreign award is not covered by the term “award” as mentioned in Item 12 of Schedule I of the Indian Stamp Act, 1889. The said ratio was held in the matter of M/s Shriram EPC Vs. Rioglass Solar [Civil Appeal No. 9515 of 2018 (Arising out of SLP (Civil) NO.13913 OF 2018)], decided on 13.09.2018 by the Hon’ble Supreme Court.
The issue arose out of a Madras High Court judgment, which overruled objections to an ICC award delivered in London dated February 12, 2015.
The Counsel for the Appellant argued that award cannot be enforced as per Section 47 of the Arbitration and Conciliation Act 1996 unless it is stamped in accordance with the Indian Stamp Act relying on the decision of the Punjab and Haryana High Court in Gujrals M.A. Morris, AIR 1962 P&H 167.
Whereas, the counsel for the respondent to the contrary relied upon the judgments of Delhi High Court reported in Naval Gent Maritime Ltd. v. Shivanath Rai Harnarain (I) Ltd., (2009) 163 DLT 391, and the Madhya Pradesh High Court reported in Narayan Trading Co. v. Abcom Trading Pvt. Ltd., (2013) 2 MP LJ 2.
Tracing the history of the Indian Stamp Act 1889 and the erstwhile provisions of the Code of Civil Procedure which dealt with arbitration, the Apex Court concluded that the 1889 Act originally dealt with awards made in British India. The awards made in princely states would have fallen outside the 1889 Act, as they were treated as foreign awards. The position continued even after Independence, as only domestic awards are covered by the Stamp Act.
The Apex Court overruled the judgment of the Punjab and Haryana High Court which stated that, award cannot be enforced as per Section 47 of the Arbitration and Conciliation Act 1996 unless it is stamped in accordance with the Indian Stamp Act, on the ground that it did not take into account the definition of ‘award’ which has been defined in Schedule 1 of the Stamp Act while also, observing that Section 47 of the Arbitration Act in no manner interdicted the payment of stamp duty if it is otherwise payable in law. The argument of the Respondent that subjecting foreign award to stamp duty will be against public policy did not cut ice with the Court. The bench concluded by saying that though existing law does not make foreign award subject to stamp duty, there is no impediment in making it so.